HOW GEAR-MAKING INDUSTRY SLIPPED IN THE UNITED STATES

HOW GEAR-MAKING INDUSTRY SLIPPED IN THE UNITED STATES

America's industry uses more gears than foreign competitors and in 1984 it manufactured more of them, too. But a 170-page study by the U.S. International Trade Commission tells how this country turned into a major importer of gears.

In the period 1984-88, imports increased more than 57 percent. Imports

from Japan, the biggest supplier, more than doubled.The report tells of layoffs, plant closings, low spending on research, on development and on new machinery. U.S. gear-makers increased earnings nearly twice as fast as sales, but by the time they got done paying for the plant closings, high interest rates and assets that lost their value, the rise was only 11 percent.

There were a lot of mergers, buy-outs and joint ventures - many of them by non-American companies. A few American producers bought interests in other countries.

By 1988, U.S. concerns could produce only 91 gears for every 100 they could make a few years earlier.

"It's not a typical rust belt industry," said Michael Bradley, a professor of economics at George Washington University.

"They've worked hard to acquire capital. They've increased their productivity and they make a real effort to keep their technological edge."

He said that unlike some other industries, American gear-makers have not switched much of their own production to other countries to take advantage of lower wages.

Mr. Bradley analyzed the report for the American Gear Manufacturers' Association. He predicted the situation of the American industry would improve.

The report said the number of jobs in the U.S. gear-making industry dropped to 84,600 in 1988 from 87,800 in 1984. The average wage fell to $17.87 an hour from $18.17, when accounting for inflation.

"Wages for production workers in West Germany are higher than in the United States," the report said.

"However, West German companies offset the difference with higher productivity, achieved in part through the use of newer, faster machines and factory automation."

In 1984, U.S. industry sold $246 million worth of gears in other countries beyond what it bought. By 1988 it was buying $316 million worth more than it sold. The U.S. industry still led the world in know-how about gears in space and in the air, but West Germany was the leader for cars, trucks and ships - and gears for cars are by far the biggest part of the industry.

During the four years the U.S. industry increased its exports, to $2.4 billion from $2 billion. But imports rose more: to $2.7 billion from $1.7 billion. They came from France and Canada as well as from Japan and West Germany.

The commission said imports increased because American manufacturers bought cheaper goods from abroad, West European and Japanese producers made concerted and successful efforts to get into the U.S. market, and manufacturers of Japanese cars in this country bought parts at home.

The strong dollar, which made imports relatively cheaper in this country, also was an element. The dollar has weakened since 1985. Richard B. Norment, executive director of the manufacturers association, said in an interview that the effect of that may have started to appear. At least the excess of imports over exports did not increase much in 1989, he said.

The U.S. gear-making industry increased spending on research and development from $53 million to $78 million, but that was still less than $1 out of every $100 worth of gears shipped. In 1985, U.S. universities spent less than $1 million on gear research, while universities in West Germany - which has only a quarter of the U.S. population - spent $3.8 million, and universities in Japan - less than half the U.S. population - spent $5 million.

In the period covered by the report, U.S. manufacturers spent $264 million for new tools, compared with $428 million for Japanese manufacturers and $543 million for West German manufacturers.